The relationship between global uncertainties and the Turkish stock market: evidence from wavelet coherence analysis

Abstract

In this study, the causal relationship between the BIST 100, Volatility (VIX), and Global Economic Policy Uncertainty (GEPU) indices is investigated using a continuous wavelet transform from January 1997 to December 2023. Wavelet coherence graphs, one of the continuous wavelet transform tools, are used to discuss the causal relationship between variables over the short, medium, and long- term. The findings revealed that the causality and correlation detected between the BIST 100, VIX, and GEPU indices may vary over time, and thus they should be considered in a dynamic structure. On the other hand, attempts have been made to discover events that could cause this change using this method. Using wavelet power spectrum graphs, it is shown that events leading to global uncertainties increase volatility in all three variables.